Pine Bluff's declining population is the most urgent financial problem facing the city, Finance Director Steve Miller says, but not far behind lurk two old, unfunded pension plans for the city's firefighters and police officers.
Miller hopes the Pine Bluff City Council will consider passing a resolution at its regular meeting Monday aimed at addressing the problem. The resolution would ask the Arkansas Municipal League to gather signatures to place an amendment to the state's constitution on the November 2018 general election ballot. The constitutional amendment would double the maximum millage a city may levy to fund police and fire pensions from one mill to two mills. The council meets at 5:30 p.m. in Pine Bluff City Hall.
Prior to the 1980s, Pine Bluff was among many Arkansas cities that had its own pension plan for police and firefighters. That changed in the early part of that decade, when it switched to the statewide Local Police and Fire Retirement System, known as LOPFE.
Pine Bluff's old plans became “closed,” meaning that no new employees were paying into them, and a deficit began to accumulate. Poor investment returns from 2000 to 2010 made the problem worse, Miller said. Pine Bluff is currently on pace to pay $13.5 million out of a $27.2 million pension plan for retired police officers, and $8.7 million out of a $18.2 million plan for retired firefighters, Miller said. The city is projected to run out of funds for the police plan in 17 years, according to a 2016 analysis.
All of the police and fire employees on the plans are now retired, and their spouses will inherit the plans should the officers pass away. Actuarial projections suggest the city could be paying the last surviving pensioner as far as 50 years into the future, he said.
The retired firefighters voted in 2013 to “consolidate” their pension plan with LOPFE to be managed by that system, and Miller said the retired police officers are considering doing the same later this month. That could mean trouble as soon as next year, when LOPFE is expected to increase the annual payments “significantly,” Miller said.
“We will pay higher payments into the plan, and that's going to have to come from somewhere,” Miller said. “If we don't raise more revenue, it's going to have to come from a reduction in municipal services.”
Compounding the problem further, the city's main source of revenue for the old pension payments may shrink. The state government distributes money back to cities each year, known as “turnback” funds. Each city's allocation is determined based on its percentage of the state's population. Pine Bluff receives about $800,000 in turnback funds annually, but that figure is in danger of falling if the city's population continues to decline, as is currently expected.
Between 2000 and 2010, the city lost more than 6,000 residents, according to U.S. Census data. The most recent census estimate has the city's population at around 45,000, more than 4,000 less than the 2010 count of 49,083.
Doubling the millage would have to be approved by Pine Bluff voters, but it could raise an extra $750,000 per year to address the shortfall expected in the coming decades for the old plans, Miller said. Before any of that can happen, though, Arkansas voters would have to pass a constitutional amendment allowing cities to increase the maximum millage. Getting that amendment on the ballot requires 85,000 signatures, and petition drives cost about $200,000, Miller said.
Pine Bluff is one of only 15 to 20 Arkansas cities currently dealing with severe pension deficits, so gathering widespread support among other cities may be difficult, he said. He's hoping the Municipal League, which represents 500 Arkansas cities, will consider an alternative by voting in June to add the millage proposal to another petition drive it is considering for an amendment to fund highways.
The council will also consider an ordinance declaring an emergency and waiving competitive bidding for engineering services to replace a small bridge on 52nd Street between Main and Ohio Streets. The ordinance would grant a $5,000 contract to Engineering Management Consultants (EMTEC) of Little Rock. Under the contract, the city's Street Department would replace the bridge under supervision of EMTEC. A quote from EMTEC projects the cost of the project at $324,800, of which $60,000 would be paid by the city.